- Expansion plans intact for 2021 and beyond
- The value of digital investments becoming more apparent
As foreshadowed in its January update, Greggs (GRG) has swung to a reported loss through 2020 – the first since it joined the stock market in 1984 – and has put dividend payments on hold until it generates enough profit to fund its expansion plans. The pastry chain opened 84 new outlets through 2020, while closing 56 existing sites. The plan is to roughly quadruple net openings through 2021 – a process that may be aided by the decimation of the UK high street, which has left many properties vacant.
Greggs was one of the darlings of the UK equity market going into 2020, but the unprecedented disruption that was to follow resulted in a 36.2 per cent fall in like-for-like sales from company-managed shops, although the blow was softened by deliveries via Just Eat, which were boosted by investments in digital processes.
The group’s reputation was well founded prior to the pandemic and – short of a return cycle of shutdowns in the economy – we envisage a rapid return to sales growth. Buy.
Last IC view: Buy, 1,657p, 17 Dec 2020
| GREGGS (GRG) | ||||
| ORD PRICE: | 2,306p | MARKET VALUE: | £2.34bn | |
| TOUCH: | 2,304-2,314p | 12-MONTH HIGH: | 2,350p | LOW: 1,113p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 317p | NET DEBT: | 79% | |
| Year to 29 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 0.89 | 75.1 | 57.8 | 31.0 |
| 2017 | 0.96 | 71.9 | 56.6 | 32.3 |
| 2018 | 1.03 | 82.6 | 65.2 | 35.7 |
| 2019 | 1.17 | 108 | 86.2 | 11.9 ** |
| 2020 * | 0.81 | -13.7 | -12.9 | nil |
| % change | -31 | - | - | - |
| Ex-div: | - | |||
| Payment: | - | |||
| *Accounting year-end of 02 January 2021. **Excludes special dividend of 35p a share. | ||||
